Failure to Disclose Expensive Assets May Put Taxpayers in Hot Water with IRS

Failure to Disclose Expensive Assets May Put Taxpayers in Hot Water with IRS

Taxpayers are required to disclose all income and assets to the U.S. government and with laws like FATCA, failure to do so could mean steep penalties.

Understanding tax laws can often be a confusing, and tedious process for taxpayers. As procedures change, navigating the updates can be a challenging task. Furthermore, reporting requirements may seem daunting for those who receive income from a variety of sources such as self-employment, tips, or inconsistent cash payments or who hold accounts or income overseas. However, when it comes to compliance, it is never a good idea to purposefully mislead the IRS or fail to disclose income and assets. This is especially true for U.S. residents living abroad since the Foreign Accounts Tax Compliance Act (FATCA) was passed and went into effect July of this year.

Financial Transparency Overseas

FATCA was passed in 2010, and now requires banks, investment groups, and other financial institutions to gather and disclose information on all accounts held by U.S. citizens. Failure to comply would lead to penalties for U.S. taxpayers and a 30% tax withholding penalty on all U.S. funds for banks and other financial institutions.

For years, U.S. citizens have been able to take advantage of offshore accounts to hide income and assets from the IRS. Now however, FATCA has turned that system on its end by requiring greater transparency from foreign financial institutions. What this means for taxpayers is that they can no longer claim small incomes while owning expensive homes, cars, or other assets. If the IRS finds out you own the latest premium sports car or a luxury investment property but don’t report the income to support it, they may continue searching and chances are you will face penalties, fines, and even criminal punishment.

Meeting Compliance

Now that FATCA has gone into effect, the United States has been able to collect a wealth of information regarding individuals’ assets and income overseas. This is part of a concerted effort by the IRS to recover “lost” tax funds that are never paid out by citizens living abroad due to obscure information reporting between foreign banks and the U.S. government.

Now that banks and financial institutions are required comply with reporting procedures (or face strict sanctions), the United States is able to gather information on individuals and companies that have failed to disclose income in previous years. As part of this process, the United States has levied fines, and even criminal charges on those who fail to comply. However, variety of amnesty programs have also been put forth allowing those who failed to disclose fully in the past to provide information regarding all interactions with foreign banks and pay back taxes without facing more serious penalties.

Law firms like Freeman Tax Law are available to assist taxpayers with bringing their accounts and tax accounts into compliance. As a result of his extensive background with accounting firms and international tax law, Jeffery S. Freeman J.D., LL.M. with Freeman Tax Law is uniquely qualified to support and represent financial institutions seeking to stay compliant with FATCA. This history gives him the unique capabilities necessary to help clients navigate FATCA requirements and to file the necessary documents and paperwork to meet their tax obligations. Services are available nationwide, by phone, or online.

About Freeman Tax Law

Freeman Tax Law (FTL) is a boutique law firm consisting of a multi-disciplinary team of tax professionals including tax attorneys, CPAs and a professional staff that have vast experience with foreign tax compliance and regulatory matters for financial institutions. FTL consults with both FFIs and USFIs with regard to Foreign Account Tax Compliance Act (FATCA) and related regulatory matters and assists them developing procedures on how to comply with these laws. FTL provides a multidisciplinary approach for filing offshore voluntary disclosures. Working to help clients prevent future tax headaches we offer a complete wealth management and estate planning team. As an experienced firm with wide reach, Freeman Tax Law provides immediate assistance to our clients planning for and resolving all tax related challenges.

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